-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, ojU9p6DzskcIaUQUVNgycILQHc1+OFBBDY49+g3xvL1FbHBAI57/6jyG83iRzEY1 HwTqI9MPRO46JVBl6oGFBQ== 0000950152-95-001659.txt : 19950807 0000950152-95-001659.hdr.sgml : 19950807 ACCESSION NUMBER: 0000950152-95-001659 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950804 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: SIFCO INDUSTRIES INC CENTRAL INDEX KEY: 0000090168 STANDARD INDUSTRIAL CLASSIFICATION: AIRCRAFT ENGINES & ENGINE PARTS [3724] IRS NUMBER: 340553950 STATE OF INCORPORATION: OH FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-05978 FILM NUMBER: 95558977 BUSINESS ADDRESS: STREET 1: 970 E 64TH ST CITY: CLEVELAND STATE: OH ZIP: 44103 BUSINESS PHONE: 2168818600 MAIL ADDRESS: STREET 1: 970 EAST 64TH STREET CITY: CLEVELAND STATE: OH ZIP: 44103 FORMER COMPANY: FORMER CONFORMED NAME: STEEL IMPROVEMENT & FORGE CO DATE OF NAME CHANGE: 19690520 10-Q 1 SIFCO 10-Q 1 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended June 30, 1995 Commission File Number 1-5978 ------------- ------ SIFCO Industries, Inc., and Subsidiaries ---------------------------------------- (Exact name of registrant as specified in its charter) Ohio 34-0553950 - ------------------------------- ------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification incorporation or organization) No.) 970 East 64th Street, Cleveland, Ohio 44103 - --------------------------------------- ------------ (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (216) 881-8600 -------------- None - --------------------------------------------------------------------------------- Former name, former address and former fiscal year, if changed since last report. _________________________________________________________________________________ _________________________________________________________________________________
Indicated by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirement for the past 90 days. Yes X No --- Class Outstanding at July 28, 1995 - -------------------------- ---------------------------- Common Stock, $1 Par Value 5,067,381 2 SIFCO INDUSTRIES, INC. AND SUBSIDIARIES INDEX
Page No. -------- Financial Statements: Consolidated Condensed Balance Sheets -- June 30, 1995, and September 30, 1994 2 Consolidated Condensed Statements of Income -- Three Months and Nine Months Ended June 30, 1995 and 1994 3 Consolidated Condensed Statements of Cash Flows -- Three Months and Nine Months Ended June 30, 1995 and 1994 4 Notes to Consolidated Condensed Financial Statements 5,6,7,8 Management's Discussion and Analysis of the Consolidated Condensed Statements of Income 9,10,11,12 Other Information and Signatures 13
3 SIFCO INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS ($000 Omitted)
June 30 Sept. 30 1995 1994 ------- ------- ASSETS ------ Current Assets Cash & Cash Equivalents $ 2,240 $ 2,256 Accounts Receivable, Net 13,092 12,883 Inventories Raw Materials & Supplies 2,428 1,847 Work-in-Process & Finished Goods 11,129 8,493 ------- ------- 13,557 10,340 Refundable Income Taxes --- 1,039 Prepaid Expenses and Other Current Assets 1,230 416 ------- ------- TOTAL CURRENT ASSETS 30,119 26,934 Property, Plant & Equipment, Net 22,500 21,476 Goodwill, Net of Amortization 4,125 4,213 Funds Held by Trustee For Capital Project 616 733 Other Non-Current Assets 2,064 2,428 ------- ------- TOTAL ASSETS $59,424 $55,784 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------- Current Liabilities Notes Payable $ 4,200 $ 2,400 Current Portion of Long-Term Debt 2,275 1,900 Accounts Payable 5,765 6,206 Accrued Expenses 4,959 4,067 Accrued Restructuring Expense --- 2,686 Accrued Income Taxes 283 --- ------- ------- TOTAL CURRENT LIABILITIES 17,482 17,259 Long-Term Debt - Less Current Portion 6,925 6,975 Deferred Federal Income Taxes and Other 4,453 4,280 Shareholders' Equity Serial Preferred Shares - No Par Value --- --- Common Shares, Par Value $1 Per Share 5,067 5,062 Paid-in-Surplus 5,864 5,849 Retained Earnings 19,633 16,359 ------- ------- TOTAL SHAREHOLDERS' EQUITY 30,564 27,270 TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $59,424 $55,784 ======= =======
See accompanying notes to consolidated condensed financial statements. 2 4 SIFCO INDUSTRIES,INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF INCOME ($000 Omitted)
Three Months Ended Nine Months Ended June 30 June 30 1995 1994 1995 1994 ------- ------- ------- ------- Net Sales of SIFCO Industries, Inc. $17,721 $14,419 $51,092 $45,831 Cost & Expenses Cost of Goods Sold 14,633 11,667 41,010 37,755 Selling, General & Administrative Expense 2,636 2,545 8,291 7,949 Interest Income (37) (23) (97) (54) Interest Expense 288 198 789 519 Other (Income) Expense, Net 1 (95) 4 (261) Total Costs & Expenses 17,521 14,292 49,997 45,908 Operating Income (Loss) 200 127 1,095 (77) Reversal of Restructuring Charge to Income ----- ----- 1,512 ----- Income (Loss) Before Income Taxes 200 127 2,607 (77) Provision (Benefit) for Federal, Foreign & State Income Taxes 110 110 279 222 ------- ------- ------- ------- Net Income (Loss) $ 90 $ 17 $ 2,328 $ (299) ======= ======= ======= ======= Net Income (Loss) Per Share $ .02 $ .00 $ .46 $ (.06) ======= ======= ======= ======= Average Shares Outstanding 5,085 5,068 5,080 5063 Cash Dividends per Common Share $ $ $ ----- $ -----
See accompanying notes to consolidated condensed financial statements. 3 5 SIFCO INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS ($000 Omitted)
Nine Months Ended June 30 1995 1994 ------- ------- Net cash provided by (used for) operating activities: Net income (loss) $ 2,328 $ (299) Adjustments to reconcile net income to net cash provided by (used for) operating activities: Depreciation and amortization 2,571 2,300 Deferred income taxes and other 173 457 Reversal of restructuring charge to income (1,512) ----- ------- ------- Subtotal 3,560 2,458 Net cash provided by (used for) changes in operating assets and liabilities, net of effect of acquisition: Receivables (209) (1,299) Inventories (3,217) (851) Accrued or refundable income taxes 1,322 1,463 Prepaid expenses and other current assets (814) (258) Accounts payable (441) (195) Accrued expenses (282) (1,903) ------- ------- Net cash provided by (used for) changes in operating assets and liabilities (3,641) (3,043) ------- ------- Net cash provided by operating activities (81) (585) Net cash provided by (used for) investing activities: Purchase of property, plant & equipment (3,060) (1,597) (Increase) decrease in funds held by trustee for capital project 117 320 Other 883 619 ------- ------- Net cash provided by (used for) investing activities (2,060) (658) Net cash provided by (used for) financing activities: Proceeds from additional borrowings 3,800 2,000 Repayment of borrowings (1,675) (675) Cash dividends declared --- --- ------- ------- Net cash provided by (used for) financing activities 2,125 1,325 ------- ------- Increase (decrease) in cash and cash equivalents (16) 82 Cash and cash equivalents, beginning of year 2,256 1,187 ------- ------- Cash and cash equivalents, end of period $ 2,240 $ 1,269 ======= =======
See accompanying notes to consolidated condensed financial statements. 4 6 SIFCO INDUSTRIES, INC. AND SUBSIDIARIES --------------------------------------- NOTES TO CONSOLIDATED CONDENSED FINANCIAL INFORMATION ----------------------------------------------------- JUNE 30, 1995 ------------- NOTES - ----- (1) Summary of Significant Accounting Policies: Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant inter-company accounts and transactions have been eliminated. Certain prior years' amounts have been reclassified to conform with the current year's classification. (2) Debt: Long-term debt as of June 30, 1995 and September 30, 1994 consisted of:
June 30 Sept. 30 1995 1994 ------- ------- ($000 Omitted) Variable Rate Industrial Development Demand Revenue Improvement and Refunding Bonds $ 2,700 $ 2,925 Note payable to bank, due in quarterly installments of $275,000, at the base rate plus 1/2% (adjusted quarterly) 3,500 1,950 Note payable to bank, due October 31, 1995, interest payable quarterly, at rates based upon LIBOR and DIBOR (adjusted quarterly) 1,000 1,000 Note payable to seller of Selectrons, Ltd., at the base rate plus 1/2% (adjusted quarterly) 2,000 3,000 ------- ------- 9,200 8,875 Less - current maturities 2,275 1,900 ------- ------- $ 6,925 $ 6,975 ======= =======
5 7 The Company has a $6 million revolving credit agreement subject to eligible working capital as defined, which expires January 1, 1996. As of June 30, 1995 the Company had $4.2 million outstanding under this agreement. In addition, the Company has a $1.15 million credit capacity which is used for an irrevocable letter of credit which secured the $1 million loan from an Irish bank due October 31, 1995. A commitment fee of 3/8% is incurred on the remaining unused balance. Interest is at the base rate plus 1/4% and is payable quarterly. The average balance outstanding against the remaining capacity was $3.7 million and $0.5 million during the nine month period of 1995 and 1994, respectively. The Company also has a term loan agreement. Interest is at the base rate plus 1/2%. Repayment terms are quarterly installments of $275,000, plus interest. The Industrial Development bond interest rate is reset weekly, based on prevailing tax-exempt money market rates, and is payable quarterly. Principal is payable in quarterly installments of $75,000 through May 1, 1996, becoming $100,000 quarterly thereafter, with the final balance due on May 1, 2002. The bonds are secured by the property and equipment of the facility, and backed by an irrevocable bank letter of credit which expires on May 1, 1996. The revolving credit, term loan and Industrial Development bonds are secured by the Company's domestic accounts receivable, inventory and equipment. Among other covenants, the Company is required to maintain a minimum tangible net worth (as defined) of $19.8 million, increasing by 50% of net income subsequent to September 30, 1993, excluding the $1.5 million reversal to income of the restructuring reserve that occurred in the second quarter of 1995. At June 30, 1995, tangible net worth exceeded the required minimum by $2.1 million. As part of the acquisition of Selectrons, Ltd., the seller provided financing in the form of unsecured installment notes. These notes bear interest at the base rate plus 1/2%, payable and adjustable quarterly. Principal is payable in annual installments of approximately $1 million, commencing July 1, 1993. The $1 million note payable revolving to the bank has a variable interest rate based on a combination of both LIBOR and DIBOR (Dublin Interbank Rates) rates. (3) Income Taxes: ------------- The provision for taxes on income, which is based on the anticipated effective rate for the year, does not bear the customary relationship to pre-tax income due primarily to foreign source income. Income tax expense differs from amounts currently payable due to certain items reported for financial statement purposes in periods which differ from those in which they are reported for tax purposes, principally accelerated depreciation. (4) Deferred Federal Income Taxes: ------------------------------ The Company has deferred to future periods the income taxes relating to timing differences between financial statement pre-tax income and taxable income. 6 8 (5) Depreciation: ------------- For financial reporting purposes, the Company provides for depreciation of plant and equipment, principally by the straight-line method, at annual rates sufficient to amortize the cost over its estimated useful life. For tax purposes, the Company uses various accelerated methods and, accordingly, provides for the related deferred taxes. The principal rates of depreciation for financial reporting purposes are: buildings 2% to 5%, and machinery and equipment 5% to 33 1/3%. (6) Inventories: ------------ The Company follows the LIFO method of accounting for certain of its Forge Group inventories. Since the LIFO inventory determination for fiscal 1995 will be based upon year-end inventory levels and costs, the Company has provided for its anticipated "LIFO Adjustment" based on its estimated year-end inventory levels and costs. Under the Average Cost Method, inventories would have been $3,393,000 and $3,378,000 higher than reported at June 30, 1995 and September 30, 1994, respectively. (7) Postretirement Health Care Benefits: ------------------------------------ The Company and its domestic subsidiaries provide certain health care benefits for non-union retired employees which are subject to the provisions of SFAS 106. The Company amended its current plan to freeze the Company's contribution to insurance premiums and exclude any active employees who retire after December 31, 1993 from eligibility for benefits. As a result of the amendments to the plan, the adoption of SFAS 106 did not have a material impact on the results of operations or financial position of the Company. (8) Other Income ------------ Other income is comprised primarily of grant income from Irish government agencies, foreign exchange gains and losses, and royalty and fee income. (9) Acquisition of Business and Non-Competition Agreement ----------------------------------------------------- On June 17, 1992, the Company acquired certain domestic net assets and the foreign subsidiaries of Selectrons, Ltd. ("Selectrons") at an aggregate purchase cost of approximately $6 million, including the assumption of $1.7 million of debt previously owed to the shareholders. The purchase price was provided from existing cash balances, a term loan from a bank, and an unsecured term loan from the seller. 7 9 The acquisition was accounted for as a purchase. The results of operations of the acquisition were combined with those of the Company commencing July 1, 1992. This acquisition is not material to the consolidated totals and its results of operations have been included in the accompanying statements of income since the acquisition date. The fair value of net assets acquired and liabilities assumed was approximately $2.6 million. The excess of purchase price over the fair value of the net assets purchases was $3.4 million, and such excess is being amortized over 40 years by the straight-line method. The Company has concluded legal action against the seller of Selectrons with respect to breach of contract. The amount of the damage award was not material. (10) Basis of Presentation: ---------------------- The accompanying financial information for the nine months ended June 30, 1995 has not been examined by independent public accountants. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary for a fair presentation have been included. 8 10 SIFCO INDUSTRIES, INC. AND SUBSIDIARIES --------------------------------------- MANAGEMENT'S DISCUSSION AND ANALYSIS ------------------------------------ OF THE CONSOLIDATED CONDENSED STATEMENTS OF INCOME -------------------------------------------------- The following is management's discussion and analysis of certain significant factors which have affected the Company's earnings during the periods included in the accompanying consolidated condensed statements of income. A summary of the period-to-period changes in the principal items included in the consolidated condensed statements of income is shown below:
Three Months Ended Nine Months Ended June 30 June 30 1995 and 1994 1995 and 1994 ------------------ ----------------- Net Sales of SIFCO Industries, Inc. $ 3,302 23% $ 5,261 11% Cost of Sales 2,966 25% 3,255 9% Selling, General & Administrative 91 4% 342 4% Interest Income 14 61% 43 80% Interest Expense 90 45% 270 52% Other Expense, Net 96 N/A 265 N/A Operating Income (Loss) 73 57% 1,172 N/A Reversal of Restructuring Charge to Income ----- N/A 1,512 N/A Income Before Income Taxes 73 57% 2,684 N/A Provision for Federal, Foreign & State Income Taxes -0- 0% 57 26% Net Income $ 73 429% $ 2,627 N/A
9 11 MANAGEMENT'S DISCUSSION - ----------------------- We are pleased to report a profit before tax of $200,000 on sales of $17,721,000 for the third quarter ended June 30, 1995. This compares to a profit before tax of $127,000 on sales of $14,419,000 a year ago and represents our fifth consecutive quarterly profit. Profit before tax for the nine months ended June 30, 1995 was $2,607,000 on sales of $51,092,000, compared to a loss of $77,000 on sales of $45,831,000 last year. The nine months earnings figures for 1995 include a benefit of $1,512,000, recorded in the second quarter, from our original reserve of $6,500,000, established in September of 1993 to cover costs associated with the restructuring of the Company's Forge Group. Net income for the third quarter was $90,000 or $.02 per share, compared to income of $ 17,000 or $.00 per share for the same period last year. Net income for the nine months including the reserve reversal was $2,328,000 or $.46 per share, compared to a loss of $77,000, or $.06 per share in 1994. Trends so far this fiscal year remain positive in sales and earnings categories. For example, our Forge segment sales during the quarter were up 47% to $6,400,000, compared to the same period last year, and in June they achieved the highest one month sales total since December of 1982. Forge sales for the nine month period were up 15% to $16,400,000, and their operating profit before corporate and interest expense was approximately $500,000, compared to a loss of $900,000 a year ago. Our Specialty Products segment achieved a 13% improvement in sales for the quarter to $ 11,800,000, compared to 1994, and a 9% sales increase to $35,900,000 for the nine months. The segment's operating profit before corporate and interest expense increased to $2,600,000 year-to-date from $2,300,000 a year ago. The Forge segment has completed an agreement with the Wyman-Gordon Company of North Grafton, Massachusetts. As a result our forging operations will work with Wyman-Gordon in both technical and marketing areas to serve the aerospace industry. Wyman-Gordon is closing its Worcester, Massachusetts hammer forging operation and the majority of that location's production has been transferred to other Wyman-Gordon facilities in Massachusetts and Texas. Wyman-Gordon's customers will be offered continued production of product not transferred to the other locations at our Cleveland, Ohio forging operations. This strategic alliance strengthens our position in the aerospace forging market. We are extremely pleased to join forces with a company that is considered the technological leader in the industry. We look forward to a close working relationship with Wyman-Gordon as their selected successor to supply the future needs of our mutual customers. During the quarter we experienced a high demand from our customers for products with relatively low margins. This created an unfavorable product mix and contributed substantially to the disparity we experienced in sales versus earnings performance. Consequently, as we continue to generate additional business, we remain dedicated to our long-term product development strategy -- a strategy which focuses our technical expertise to serve not only the present demands of our customers worldwide, but also prepares products and services in anticipation of their future needs -- a strategy that we are confident is well designed to enhance our future profitability. 10 12 FINANCIAL ANALYSIS - ------------------ Net sales for the third quarter ended June 30, 1995 increased $3.3 million to $17.7 million from $14.4 million a year ago or 16%. Defense-related sales were $1.9 million compared to $1.5 a year ago. The Company reported net income of $.09 million compared to $.017 million a year ago. Income from operations before corporate and interest expense increased to $.8 million from $.6 million last year. Net sales for the nine months ended June 30, 1995 increased $5.3 million to $51.1 million from $45.8 million a year ago. Defense-related sales were $6.4 million compared to $5.6 million a year ago. The Company reported a net income of $2.3 million compared to a loss of $.3 million a year ago. Net income for the nine months benefited $1.5 million from the reversal, in the second quarter, of the reserve that was established in September 1993 for the restructuring of the Forge Group. Income from operations before corporate and interest expense increased to $3.1 million from $1.4 million last year. Net interest expense for the third quarter was $.3 million compared to $.2 million a year ago. Year-to-date net interest expense was $.7 million compared to $.5 million a year ago. New orders received for the third quarter were $18.5 million down from $20.4 million a year ago. Included in the third quarter last year was $7 million of orders relating to a helicopter retrofit program. Year-to-date, new ordered received were $54.1 million compared to $48.6 million a year ago. SPECIALTY PRODUCTS net sales for the third quarter increased $1.4 million to $11.8 million from $10.4 million a year ago. Specialty Products income from operations before corporate and interest expense increased to $.6 million from $.4 million a year ago. SPECIALTY PRODUCTS net sales for the nine months increased $2.9 million to $35.9 million from $33.0 million a year ago. Specialty Products income from operations before corporate and interest expense increased to $2.6 million from $2.3 million a year ago. FORGING net sales for the quarter were $6.4 million compared to $4.4 million a year ago. Defense-related sales were $2.2 million (34%) compared to $1.6 million (34%) a year ago. Forging operating profit before corporate and interest expense was $.2 million compared to break even a year ago. FORGING net sales for the nine months were $16.4 million compared to $14.3 million a year ago. Forging operating profit before corporate and interest expense was $.5 million compared to a loss of $.9 million a year ago. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- Working capital increased to $12.6 million at June 30, 1995 from $9.7 million at September 30, 1994. The current ratio was 1.7 at June 30, 1995 and 1.6 at September 30, 1994. Total debt as a percentage of tangible shareholders' equity was 57.1% at June 30, 1995 compared to 53.2% at September 30, 1994. 11 13 Capital expenditures for the nine months were $3.1 million compared to $1.6 million a year ago. The Company considers it has adequate financing available to meet its needs for the year. PROVISION FOR TAXES ON INCOME ----------------------------- The provision for taxes on income, which is based on the anticipated effective rate for the year, does not bear the customary relationship to pre-tax income, due primarily to foreign source income. 12 14 Item 6. Exhibits and Reports on Form 8-K (a) The following Exhibits are included herein: Exhibit 27 Financial Data Schedule (b) No report on Form 8-K was filed during the quarter ended June 30, 1995. SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized. SIFCO INDUSTRIES, INC. ______________________ (Registrant) Date August 2, 1995 /*/ Jeffrey P. Gotschall ______________ ______________________________ Jeffrey P. Gotschall Chief Executive Officer Date August 2, 1995 /*/ Richard A. Demetter ______________ ______________________________ Richard A. Demetter Vice President - Finance (Principal Accounting Officer) EX-27 2 SIFCO 10-Q EX-27
5 0000090168 SIFCO INDUSTRIES, INC. 1,000 9-MOS SEP-30-1995 OCT-01-1994 JUN-30-1995 2,240 0 13,092 0 13,557 30,119 22,500 0 59,424 17,482 6,925 5,067 0 0 25,497 59,424 51,092 51,092 41,010 49,301 1,508 0 692 2,607 279 2,328 0 0 0 2,328 .46 .46
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